This document discusses how better structuring compensation policies can reduce an organization's cost of compensation as a percentage of sales without necessarily reducing salaries. It suggests taking a strategic review of the total compensation approach, including components like bonuses, to ensure the compensation strategy supports both the business strategy and talent strategy. The document hypothesizes that better structuring compensation can lower costs but that claim still needs full testing.

1. Reduce your Cost of Compensation.
| talentonicmethodologies
TALENTONIC RESEARCH DIVISON | www.talentonic.com
“When we speak to employers about bringing
down their cost of compensation, they think we
are talking about reducing salaries…or worse
still that we are selling employee engagement!!
Better structuring and a strategic review of the
compensation policy can actually reduce your
compensation bill as a percentage of sales”
This document and the methodologies mentioned are the property of Talentonic HR Solutions (Pvt) Ltd, and
may not be used, copied or forwarded without the written consent of the Company.

2. www.talentonic.com
Cost of Compensation
values.
“I
love
folks
in
Product
Reducing cost of compensation should Development.
“
They
are
the
“future
be a leadership objective particularly
of
this
company”
But
they
must
be
for organizations where the employee
content
earning
less
then
the
folks
in
cost as a percentage of sales is 15-16%
supply
chain
and
general
and upwards. In IT companies where it
management
and
HR
and
can move up to heady levels of 40% or
administration
and
internal
more, it should be a strategic priority
communication.
You
must
be
joking!
with some urgency.
You
just
signed
away
the
“future
of
The issue is not what you are paying. Its this
company”
what are you getting in return as
business performance or behavior? Is
your
compensation
policy
supporting
your
business
strategy?
Many organizations’ still do not have a Or
is
it
just
a
cost?
“total compensation approach” Nothing
wrong with that, I would say. Don’t go Is
your
compensation
strategy
and complicate your life more than what supporting
your
talent
strategy?
Or
your business model requires. The they
do
not
talk
to
each
other?
problem starts when you try and use the
very simple compensation structure to I
wonder
sometimes
why
achieve some very complicated short organisations
comfortably
fall
into
medium term and long term results. If the
ritual
of
annual
salary
review
of
your compensation strategy is not base
pay
particularly
for
senior
folks.
important to your business results, let it Base
pay
is
grade
pay.
You
should
lie. If it is, do look at all its components. review
it
if
market
data
shows
that
you
are
seriously
out
of
gear.
In
many
Sometimes HR Managers behave as if markets
there
is
no
need
to
do
it
C&B is not an HR function, or should every
year.
Don’t
use
it
to
reward
not be. So sometimes we tend to forget performance.
That’s
what
the
bonus
that what you say in your C&B strategy plan
is
meant
to
achieve
without
is a very loud communication to your adding
to
individual
fixed
cost.
employees about what the Company

3. www.talentonic.com
Cost of Compensation
Disproportionate
amount
of
time
is
of reducing the cost of
spent
figuring
out
what
the
market
is
compensation. That hypothesis
and
how
to
create
the
best
proposal
needs no proof.
for
review
of
base
pay.
That
is
However, better structuring of
certainly
a
requirement
and
must
be
compensation can also reduce the
done
but
the
truth
might
well
be
that
cost of compensation is a powerful
your
employees
will
probably
forgive
concept but still to be fully tested.
you
for
paying
15%
below
market
but
they
will
not
accept
10
bucks
less
then
the
guy
sitting
next
door.
Internal
equity
may
get
you
more
value
than
market
equity.
And
cost
Deepak Dhawan
CEO & Founder
you
lesser,
and
earn
you
the
Talentonic HR Solutions (Pvt) Limited
reputation
of
being
a
fair
employer.
deepakdhawan@talentonic.com
Bonus
Plans
could
be
better
calibrated
to
create
the
performance,
which
is
critical
for
the
business.
An
area,
which
is
still
evolving,
at
least
in
India,
is
looking
at
total
compensation
strategy
and
cost,
designing
medium
and
long-­term
compensation,
linking
compensation
with
talent
strategy
and
using
equity
compensation
more
intelligently.
Yes,
a
high
employee
engagement
score
and
the
strength
of
the
“social
contract”
is
certainly
capable
of